A Dollar ‘Death Cross’ May Presage Rise for Stocks

Dollar bulls and stock bulls take note: A technical indicator flashes gloomy signal for the value of the greenback, though it may presage rally in US stocks.

Jonathan Krinsky, chief technical market analyst at Miller Tabak, notes a “Death Cross” occurred Friday for the US Dollar Index (DXY). This occurs when the 50-day moving average crosses beneath the 200-day moving average from above.

He notes that over the last four years, this has occurred only two other times, and both times preceded a 10% sell-off for the dollar index.

“Given the inverse relationship of S&P to the DXY of late, this also preceded rather large rallies for stocks,” he says. “Of course, this relationship can always reverse, but for now it should likely be viewed as a positive for risk assets.”

It’s not doing much today. The DXY was recently down 0.1% at 79.672, and the S&P 500 was down 3 points at 1430.

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